How Is The Living Allowance Calculated? What The IRD Told Us

In May 2015, a team from the Inland Revenue Department approached us and asked if they could come onto our Facebook page and answer questions around the recent changes to child support in NZ.

We agreed, a little hesitantly as we had no idea of what the response would be, but we figured that the more that people are talking about the issues, the better.

The response from our community was overwhelming.

In one of the recent changes, effective from April 1st, 2015, the living allowance underwent a massive restructure that has directly impacted on a large number of families.

Some of the questions IRD received, on our page, were regarding that living allowance…

Karen asked:

I want to know how many of these people who have made the price of ‘living allowance’ could actually live on that amount (even when you have up to 7 kids at once in your house)? How is the living allowance calculated? Less than $350 per week, for rent, food, power, petrol, clothes, water, then when you have kids, bigger house, more petrol to pick them up, more food, more water, supplies for them(clothes, fun, hygiene stuff). How can ANY person provide all that on LESS than $350 per week?

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Michelle also asked about the living allowance:

I would like the living allowance to be broken down. How much is allowed for rent, food, power etc where do you get your figures from? In our circumstances I’ve been made redundant from my job so my husband’s wages supports a total of 5 in our household. My ex husband has never been consistent in paying his $74 per month for our 3 children. My ex husband is a contractor who drives around in a 25,000 truck has a jetski and motorbikes and makes stainless steel lamps on the side and gets away with all this. My husband pays $160 per week child support for his 18 year old daughter. This new formula is slowly sinking us in a big black hole.

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IRD’s answer:

Thanks for your questions. We do appreciate that every families costs and circumstances are different.

Under the new rules, the living allowance recognizes the living cost the parents have to financially support themselves. It is what the government considers is the minimum level of income necessary to cover a parents own living costs, before child support is assessed. It is income that is not considered when making a child support assessment.

If the parent also has other dependent children of their own living with them, they will be entitled to a separate dependent child allowance. Dependent child allowances are also taken off the parents income before child support is assessed.

For a parent who earns more than the living allowance and the dependent child allowance, they will still have income over and above their child support payment available to support themselves.

The living allowance for a parent is the same amount as either the sole parent support, or supported living payment benefit. As with the benefit it is not broken down into different amounts for the different types of expenses.

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Thanks for the answer IRD, however there are a number of areas of concern that remain:

The answer given is somewhat confusing, firstly it mentions that they appreciate that everyone’s costs are different (yet the living allowance is one set amount), then it goes on to say that it is the minimum level of income necessary to cover a parents own living costs. There is however, no break down or justification of these costs.

Why is it just a flat rate i.e one size fits all, yet IRD constantly states that the reason child support is based as a percentage of income is because “One size doesn’t fit all”. Surely either one size fits all, or one size doesn’t fit all?

Ref IRD website-Rather than being a one size fits all, from 1 April 2015 a new formula includes both parents’ incomes and circumstances, and recognises a wider range of care. So the amount of child support some parents pay or receive may change

When you go for an admin review to try to get an increase on living allowance, why do you have to justify how you spend every cent, yet the receiving parent doesn’t need to state how they spend the child support money or even need to submit their expenses?

It’s not quite the same as the sole parent support benefit, as that particular benefit offers additional amounts of help including an accommodation supplement (which appears to be related to where you live interestingly, yes cost of living is different in different towns).

Over the next few weeks we intend on breaking down the answers given, we want you to share with us what you think.

This problem is not going away and we all need to unite together to highlight the inadequacies of the new formula.

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1 Comment

Definately one size does not suit all. $360 a week for rent, which by the way is considered cheap in Perth. That doesnt leave anything especially when you still have food electricity, gas, phone, petrol to be able to go to work. Come on I.R.D. regonise the ones in Australia. It costs more to live here. Then you go and take it on the gross pay, and then add the difference on the exchange rate. Go for a rent supplement I.R.D. say: that doesnt work in Australia. Will I.R.D deduct the amount of the rent supplement for all Kiwis living in Australia. I think not. This is cruel and so totally unfair. The one size is probably worked out for all Kiwis living in NZ. The Australian parent is definatly been penalised as stated above, .Whoever made the rules needs to live on the living allowance for a few months, See how they can then say its fair.